Water wholesaler raises rates for 2016-18

A Tri-Valley water wholesale board decided Wednesday to raise rates for retailers, a move that will likely mean an increase in ratepayers' water bills in 2016 and beyond.

The Zone 7 Water Agency board voted 6-1 to raise treated wholesale water rates about 28% for 2016 and at least 10% for 2017 and 2018 for its retailers, which are currently the cities of Pleasanton and Livermore, Dublin San Ramon Services District and Cal Water.

The public meeting, which was held at the agency's headquarters in Livermore, drew about 45 people to discuss topics on the agenda -- but about 19 of them were local Boy Scouts observing to earn their "Citizenship in the Community" badge.

Pleasanton city councilmember Kathy Narum, speaking on behalf of the city, was among a handful of individuals who spoke out against the rate increase as proposed. She said rainfall and residential water use estimates are difficult to estimate, thus making revenue projections debatable.

"We cannot support a rate increase after the first year at this point, given the uncertainty," she said.

The new wholesale rate will be $3.15 per 100 cubic feet of water (CCF) for 2016, $2.93 per CFF for 2017 and $3.32 per CCF for 2018. Previous rates were based on amount of water used, but the most common billed rate for its retailers was $2.36 per CCF.

The change is expected to be passed through by retailers to ratepayers' bills, which means residential monthly bills may increase by $7.90 a month for 2016, according to Zone 7 estimates.

The new rate includes a 10% rate increase for three years, as well as an additional drought surcharge of 57 cents per CFF -- an increase of 18% based on the current rate -- that will end in December 2016 but can be reinstated by a board vote. The new rate is also uniform regardless of consumption.

The agency has been discussing raising its rates since this summer, and August and September board meetings included presentations by Sanjay Guar, vice president of Raftelis Financial Consultants, which was paid to evaluate Zone 7's rate and financial viability.

Agency staff and board members again stressed the need to raise rates due to declining water sales due to water conservation prompted by the drought, a historic unwillingness to raise rates substantially since the recession and substantial upcoming capital improvement costs that hover around $20 million a year.

Without a change in the district's rate, the agency would have a deficit of $7 million for operational and maintenance expenses by 2017.

The new rate sets the agency to be in good financial standing to take out about $43 million in debt in the 2017-18 budget year -- a plan that staff is steering the agency toward in order to pay for large upcoming projects while spreading out the impact over a few decades.

Board member Angela Ramirez Holmes voted against the measure. She said her vote wasn't because she opposed a rate increase in general, but rather she felt the current rate increase went beyond what was necessary to set the agency up for a positive financial future.

She said she opposed the fact that "90% of the rate increase" was going into capital improvement reserves. She said she could have supported a one-year 10% rate increase with the one-year drought surcharge, but she couldn't support a three-year increase with the surcharge.

Given the current plan, which includes taking out debt in 2017-18, the agency's capital improvement reserves would jump from $18 million this budget year to $47 million in the 2017-18 financial year.

The board didn't come to an agreement about what constitutes a healthy reserve fund and what amount is too much to tuck away. In general, the agency is set to spend about $13 million on capital improvement projects next financial year, $23 million in 2017-18 and $22 million in 2018-19. Zone 7 general manager Jill Duerig said at several board meetings these projects are necessary because they've been delayed for years due to budget issues.

Some projects include adding ozone filters to water treatment plants, as well as replacing old pipes and old pumps that are threatening to fail, especially if an earthquake comes along, Duerig said.

The 10% rate increase will stay in effect until June 30, 2018 unless the board decides to bring up a measure to change the rates, which board members can do at any time. However, board members acknowledged passing a one-year rate or changing the rate before debt is issued could severely hurt the agency's chance at getting an appropriate interest rate down the line.

At previous meetings, residents came before the board to ask the agency to consider cutting costs before it raises rates. Staff presented information Wednesday about cut-cutting measures that have been ongoing for years, including deferring $200 million in expansion projects, deferring $14.7 million in replacement and upgrade construction projects, implementing a soft hiring freeze, not giving cost-of-living raises based on inflation for the past three years and having employees take on 10% of medical costs since 2011 -- as well as mentioning at previous meetings the agency has been giving "golden handshakes," which means laying off executives.

However, several board members said Wednesday and at their September meeting that the agency is in bad financial shape due to the board's unwillingness to raise rates over the years, partially because they didn't want to add to retailers' financial pressures after the recession.

"I'm rather frustrated and embarrassed that we as a board rolled over and didn't raise rates the way we should have," board member Dick Quigley said.

In other water news:

The Zone 7 Water Agency also decided to start videotaping its board meetings on TV 30.

The board voted 5-1 to pay about $23,000 to record the meetings, stream them online and play them on Tri-Valley Community Television, also known as TV30, after the meetings have finished.

The measure is meant to increase the board's transparency by providing greater access to its constituents, who will be able to access the television broadcasts and online videos for free.

Marshall Kamena, president of the Tri-Valley Community Television Foundation and former Livermore mayor, said adding video recordings help residents better understand the context of decisions that are made. He said it gives constituents an easily accessible tool to get involved in understanding what is happening on their local boards since the videos can be streamed on a mobile phone or computer, in addition to written minutes and recorded audio.

Narum, a Pleasanton city councilmember, spoke on her own behalf and said video recordings increase public awareness and public participation.

"Philosophically, it's just good government to be as transparent as much as you can," she said.

Board member John Greci abstained from the vote but stated he opposed the idea, and board member Bill Stevens voted against the measure, saying the agency didn't need to spend any more money on transparency since audio recordings and written minutes are already taken at each meeting.

The agency has faced criticism related to perceptions of transparency in recent months. An Alameda County civil grand jury released a report in June stating the agency wasn't fully transparent during its deliberations to buy land surrounding Lake Del Valle for $18.6 million.

The civil grand jury argued that by making all discussions on the sale of the Lake Del Valle land during closed session, Zone 7 had violated the Brown Act -- the state's open government and public records laws -- by failing to make a public case for the purchase and to disclose the financials of the purchase prior to making the deal.

The agency rebutted a section of the public information act gives an exemption that allows agencies to discuss sale and purchase of property in closed session as long as the final decision is reported in open session.

The specific exemption states "a legislative body of a local agency that invests pension funds may hold a closed session to consider the purchase or sale of particular, specific pension fund investments. All investment transaction decisions made during the closed session shall be made by rollcall vote entered into the minutes of the closed session."

Comments

3 people like this

Posted by Matthew Marcus
a resident of Livermore
on Oct 23, 2015 at 12:11 pm

This is disgusting. Yet another example of the monetary extortion coming from the State's bureaucratic web of utility management. Yes we are in a drought. Are we going to "run out of water"? No. Are we being gouged by those looking to "never let a crisis go to waste"? YES!

I hate living here. I'm so tired of everything I work so hard for, constantly being chipped away at by greedy government cronies who are just padding their pockets. What happened to this once great state? Oh, that's right.. the Left took the wheel and has us peddle to the metal straight for the cliff...